The Money Advice Service at a glance
The Money Advice Service (MAS) began life as part of the Financial Services Authority’s (FSA’s) financial capability division. In April 2010, it was rebranded as the Consumer Financial Education Body, before becoming the MAS in April 2011. It is independent and gives free, unbiased money advice online, on the phone or face to face. It is funded by a levy on the financial services industry, raised via the FSA.
Online calculators and planners provided by the MAS include services to help with everyday money questions, savings and investments, pensions and retirement (including auto-enrolment), credit cards and mortgages.
The MAS is undergoing a review, which aims to add new services by the end of 2012 and to offer its practical money advice service to 1.9 million people each year, growing to 11.3 million a year by 2016/17.
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Career history: Stuart Bailey
Stuart Bailey has been manager of national partnerships at the Money Advice Service (MAS) (previously the Consumer Financial Education Body) since April 2010. He was previously manager of regional delivery in the Financial Services Authority’s financial capability division for three years before it evolved into the MAS.
Earlier in his career, Bailey spent more than 20 years at Abbey (now Santander), latterly as head of Abbey at Work, where he specialised in staff share plans.
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Stuart Bailey, manager of national partnerships at the Money Advice Service, explains the importance of workplace financial education to Jennifer Paterson
Marks and Spencer, E.On and the Ministry of Defence are among a growing number of employers taking advantage of the Money Advice Service (MAS) to offer workplace financial education programmes to staff.
Stuart Bailey, manager of national partnerships at MAS, says that list currently includes more than 250 UK organisations. “We work with employers, helping them to communicate what employees need to be thinking about in terms of their money,” he says. “The service is offered free of charge, but we are really looking to work with employers where financial education is important enough for them to put time and resources aside to make it a success.”
There are a number of reasons why financial education in the workplace is so important, says Bailey. “It was recognised very early on that the workplace is a logical place for employees to receive money advice. An individual’s personal finances are closely linked to their job, not just their salary but pension, healthcare, life insurance and other forms of saving and investment. As such, the workplace is a logical place for people to have access to resources that help provide a better understanding of personal finances.”
Educating staff about their finances can also help instil value into the benefits package their employer offers. “Employers spend a significant amount of money on providing benefits programmes, but do not always invest the same amount of time in considering whether employees understand their real value,” says Bailey.
“That is where financial education really helps, by ensuring employees are better equipped to manage their own money and have a better understanding of the value of their pension scheme, their health insurance, their share plans, and the other opportunities their employer gives them.”
Introducing a programme
There are many reasons why employers might introduce a financial education programme into the workplace, but there is a lot to consider when doing so, says Bailey.
“It is important that an employer works out what medium will be most effective in getting the message across, what help it will need from an external supplier, and has a clear understanding of what success looks like and how it will be measured,” he says.
Employers must consider which media to use to provide financial education to staff whatever their situation. These can include group seminars in the workplace, one-to-one advice sessions or a telephone service to enable staff to obtain advice away from work.
“For employees approaching retirement, we have resources around preparing for retirement, which are in the form of a handbook and helpful information on the website,” adds Bailey.
Employers offer financial education for a wide range of reasons, he says. “Sometimes it will be because they are changing a benefits programme or launching a new benefits programme, and are really keen for employees to understand how that programme will tie into their own personal finances. Sometimes it is a rolling programme that is offered to new recruits, sometimes it is offered at a career stage. Increasingly, we are seeing our service linked to the annual invitation to flexible benefits selections.”
More integrated approach
Integrating financial education into the delivery of a flexible benefits scheme is something Bailey expects to see grow in popularity in the next couple of years. “It has become much more integrated, whereas 10 or 15 years ago, an employee was told which benefits they had and that was it,” he says.
“One of the challenges as more employers move to a flex scheme is ensuring employees make the right choices. Having financial education resources helps an employee have a better understanding of their own personal finances. If employers do some financial education prior to a flex enrolment period, then employees are better equipped to work out if they have got sufficient life assurance or are saving enough into their pension.”
Financial education can also help prepare staff to take part in flex by prompting them to think about other elements of their benefits package. “The starting point is for employees to have a better understanding of money in general and then, if they do something like a money health check, which would give them an action plan of things they should be thinking about, that will equip them really well for their flexible benefits enrolment period,” says Bailey.
In 2012, one issue shaping the need for financial education in the workplace is helping staff to understand the background and implications of auto-enrolment under the pension reforms, which will take effect from October. Bailey adds: “The introduction of auto-enrolment will lead to a further boost in financial education activity over the next couple of years.”
The Money Advice Service has spent the past few months talking to the pensions industry, particularly organisations that advise employers about their pension schemes and administer those schemes. “A lot of work has been done around the process and the systems behind what employers will need,” says Bailey. “The bit we are finding people are quite interested in, and perhaps it is still in development, is what does it mean to the individual employee? They will get a letter telling them they are in the pension scheme, but for an employee to make the right decision about staying in the pension, opting out or increasing their contributions, they need to have a sense of the cost of the pension and their own personal affordability.”
Auto-enrolment calculator
One option is to give staff access to an auto-enrolment calculator to see the impact of the pension scheme on their take-home pay. “Off the back of that, if money is tight, help to find out where they can find the extra money in their general budget,” says Bailey.
“Financial education is letting employees know what a pension is and how it works, but the starting point is really helping them work out how they can afford to be in a pension, particularly at a time when many employees have not had pay rises and the economy is tough. Good financial education will help staff find ways to afford even a modest contribution into the pension.”
In a year when many employees will be enrolled into a pension scheme for the first time and pay freezes are still common, it falls to employers to ensure staff are financially educated to deal with added costs.
“There is a responsibility on employers to provide resources for employees so they are equipped to make the right decisions for their future,” says Bailey.
Read more from the financial education supplement